-- Posted Monday, 2 November 2009 | | Source: GoldSeek.com
By R. D. Bradshaw
Back on Sep 21, 2009, Financial Sense University had a great article by Eric Andrews on the “Biggest Financial Issue of All Time—Will there be Inflation or Deflation.” Andrews was on the mark in terms of what must surely be recognized as one of the most important questions facing man in our time. Without a doubt, it is an over-riding issue which will determine what the financial markets will be doing in the coming days. For gold, silver and commodity advocates, it is the issue to at least determine the medium term.
Of course, it is easy to predict gold at $3000 or $5000 one day in the long term future—as I and others have done. And with the huge Rothschild Cabal manipulations, the short term is not in any immediate need for a focus by many persons. That leaves us with the question of the trend line for the intermediate term.
It goes without saying that those opting for deflation can see commodities and even gold and silver facing prospects of a serious down term. A hyper-deflationary scenario like we had in the 1930s will spell out an economic catastrophe for many Americans. Market Ticker has been perhaps one of the leading proponents of the hyper-deflation hypothesis. The Goldsmiths Parts 54, 56, 73, 83, 91 and 92 have discussed the Market Ticker projection of a deflationary collapse coming by early March next year.
Conversely, Inflation believers can speculate on a take off in gold, silver and commodities which will see prices quickly rising to the upside in an explosion never seen before in American history. International Forecaster has perhaps been the leading proponent of a soon/immediately coming hyperinflationary blow off to be followed by a serious depression (although this IF projection may have changed recently).
So the big question we face now is which way will it go? Rapidly up or rapidly down?
More on the Views of Eric Andrews
Eric Andrews lays out the reasons why one or the other course could transpire in the coming days. Of course, there are a number of good reasons supporting both alternatives which he lists. But, in the main, the key reason devolves to either an increase in the money supply and credit (for inflation) or a decrease in the supply of money and credit (for deflation).
Andrews then addresses the question and allows for both. He says that “we're already in Deflation. Even the inflationists can't dodge the issue that the supply of money includes some form of credit. Under our system, Money isn't separate from credit, Money equals credit.” For his proof, he cites the words of Robert H. Hemphill, Credit Manager of the Federal Reserve Bank: “We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is.”
To the above, Andrews adds another key point: “Because all of our debt-based fiat money is borrowed into existence, the money does not exist before the loan in a savings account somewhere, and therefore the loan is backed with the promise inherent in each individual loan, a 1=1 equation. However, the important part and the very reason for the loan is that it requires interest. So the full equation is $1=$1 + 5% or whatever the rate is. This always creates a synthetic dollar short position, by definition. If every loan were repaid, every dollar would disappear, strange but true; but what's more, the last dollar would disappear long, long before the last loan was repaid—the interest would still be outstanding! Only the principle is what is borrowed, not the interest. For the interest to be paid, ever-increasing quantities of money must be created, via extending ever-increasing volumes of loans. For where would we get the interest to re-pay existing debts? It would have to be borrowed into existence! And how would we do that? With yet--more interest.”
Thus, per Andrews, our monetary system must increase at an increasing rate forever in the vein of a finite planet. Since it cannot continue forever in our finite system, it must eventually collapse. And once a bubble trend collapses, it has never been reflated before until all the previous unfounded credit has been wiped out, and the system returns to reality.
He adds that our money is not printed. Even monetizing Treasury debt is not monetizing the debt in the same way that Weimar Germany printed notes on one side with many zeros. Our monetizing, per Andrews, is “borrowing money from and owed to the Private Fed and her member banks, which not only must be repaid with interest eventually, but there is an ongoing interest charge due each month.”
Eric Andrews then advances the argument that the US can destroy its currency thru inflation by either printing paper currency or by transferring electronic cash to each individual’s bank account. He notes the reality that the money supply is increasing and the credit supply is decreasing and notes that the contraction in credit (deleveraging) has reflected itself in a reduction of asset values to as much as -40%.
In the vein of what’s next, he says: “Inflationists believe the government will step in and actively devalue the dollar, both to increase the nominal (not real) value of assets, and to avoid delivering on their promises such as Social Security and Medicare. Deflationists believe the government and banks will not destroy their power base--the bond market and the currency--to do so, and will instead simply force defaults by everyone else and be the last man standing by simply hesitating.”
On the belief that the government and banking system can and will create money to avoid a deflationary melt down, it must be said that this has not yet happened although plenty of opportunities have surfaced to allow such an eventuality to offset the huge contraction going on not only in the US but worldwide. The point he makes is that this has not yet happened though it could have happened in the past year or so. The conclusion is that things are falling hard and we are in a clear deflation mode (deflation being a contraction in the supply of money and credit). The trouble is compounded because unfunded liabilities alone at the Federal level in social security, medicare, debt, interest and wars is near $100 trillion. By adding in private sector debt of $45 trillion and corporate, state and local debt, it comes to $two million per non-poverty household.
So, if they’re not going to inflate now to prevent deflation (and they have had a year or so to do it; and money has been no issue as they have doled out trillions of dollars in bailouts, mergers, nationalizations, etc), Andrews asks when will they? His answer notes: “To inflate on the scale required to have any impact on the credit contraction would require the Government and banks to actively, openly, and publicly devalue the dollar say 50%, 80%, 99% overnight, in a Mexican or Argentine fashion.” And as we know, right now, the powers that be are in no mood to do it.
As the article outlines, there are only two ways to handle the unpayable debt problem facing the US—either default it or inflate it away. Either way, it will mean catastrophic consequences. It says that the inflation option will hide the true cause of Government and Wall Street excesses, and save those two groups at the expense of savers and foreign creditors, as well as sharply increasing life-giving revenue by taxing inflationary gains at home. This is a tempting option for any government. Yet, per Andrews, they have not done so. And why not? Andrews gives the reason as “timing.”
He adds that the banks, government, and the Fed, have shown that they are not going to inflate—yet. They will stand back, hope, analyze, and hesitate until the deflationary collapse happens for them. And it's happening now as we can see that consumers cannot take on more debt even if they wanted to; they are slowly falling behind on servicing the debt they already have. The natural weight—if unaltered by a truly massive intervention is a deflationary contraction that impacts almost everything in the economy to include the Dow falling to 5,000 or lower per Andrews.
He then suggest that with a huge collapse, the banks, Fed, and government could inflate on a massive level and thus default on the debt using inflation instead of bankruptcy. As he puts it, “they would finally have an excuse large enough to hide behind.”
He adds that there is one other scenario that “the government will still actively and intentionally inflate, and will in fact plan or cause the event they will use as an excuse for their actions. For our purposes, however, this is the same thing—we will first look for the destructive EVENT, one which will drop the market and seize the banking and credit system, and then afterwards, see if they take real action to inflate.”
Andrews then concludes by offering his belief in a third option that accounts are imbalanced and are such a mockery of reality that the present system will disintegrate to be rebuilt piece-by-piece. He says that the dollar will vanish in its present form, perhaps reformed in one or three world currencies, and/or perhaps with a dollar backed by gold at a far lower rate.
My Take
Eric Andrews has done a great job of defining the problem. I am in agreement with his presentation except I do have a slightly different belief on what the future may entail. My position has not changed this past year-plus on whether inflation or deflation is coming. I have consistently held the same position as I hold today, and as I have often described at www.analysis-news.com.
Per my presentations, in the Goldsmiths 106 and in Understanding Money and War, Part XIV (at www.analysis-news.com), there is a set of ancient writings which guides and controls the planning and operations of the Rothschilds and their Cabal relatives and colleagues. The short of it is that the Cabal bankers do periodically cause depressions by withdrawing money/credit from circulation (money equals credit in our fiat system, as allowed above by Eric Andrews).
They have done this many times over during the last 250 years in the Western Christian civilization (as well as create wars which they also have power to cause). They did it in the late 1920s to cause the great depression of the 1930s. That one almost got out of hand to destroy their rule of the US. But FDR saved them. Again, they have embarked on the same path in this decade except I argue that they don’t want things to get as bad as they did in 1932 for fear that the dumb Americans may rise up and take their wrath out on the bankers.
Thus, the present Rothschild Cabal directed contraction is being monitored and controlled in an effort to keep it from exploding out of hand in a giant deflationary collapse. In the present tense, the Cabal is in charge and following their MO to the letter. They are deflating things to bring on contraction and depression by withdrawing M3 money and credit from the hands of the public (that’s why the Fed refuses to publish any data on M3).
There is Agreement Out There
I’m not the only writer who has put two and two together to plainly see that the Fed is not helping to expand credit/money; but instead, the Fed is contracting money/credit. On this, the Sep 28, 2009 Market Ticker had an article on Fed Hubris on Display: Fischer--which quoted Fisher (in possible reference to Stanley Fischer at the Bank of Israel, a former US Fed official who was considered this year to become president of the New York Federal Reserve Bank) as follows:
“But what B-movie writer could have conjured up this scary scenario—Too Big To Fail (TBTF) banks as the Blob that ate monetary policy and crippled the global economy? That's just about what we've seen in the financial crisis that began in 2007… Obstructions in the monetary-policy channels worsened a recession that has proven to be longer and, by many measures, more painful than any post-World War II slump. With its conventional policy tools blocked, the Fed has resorted to unprecedented measures over the past two years, opening new channels to bypass the blocked ones and restore the economy's credit flows.”
Noting the Fischer pitch that the Fed is a victim, in the Fischer statement, Ticker asserts “That is a damned lie. The Fed hasn't managed to establish ‘routes around’ the blockage at all - they have instead supplanted normal credit flows, and in fact have done so through opacity and intentional hiding of losses… The Fed has in fact ran a Ponzi Economy for the last 30 years, as I have repeatedly documented. Now, having come to the end of the rope they wove themselves they're upset that the Ponzi Game has run out.”
In terms of the bad paper on the balance sheets of the big banks, Ticker says “It was not an accident - it was an intentional, willful policy of The Federal Reserve, of which Fisher is a part! Without junk borrowers you don't have trash masquerading as real loans! This was no ‘accident’ of history or some sort of ‘hoodwink’ game being pulled on The Fed - quite to the contrary. The Fed was not only complicit in the scam it was a chief architect - one without which the mess simply could not have happened in the first place. It was logistically and operationally impossible for these banks to become ‘Blobs’ without the active conspiracy and fellowship of The Federal Reserve.
“Today The Fed continues in this role. It has not forced banks to come clean, it has not forced regulatory reform and in fact has obstructed it, it continues to take garbage for ‘assets’ and purchases same, and it has resisted FOIAs intended to discover the truth. It argues that we should ‘trust The Fed’ when in fact there is a nearly-unbroken 28 year history of driving the economy closer and closer to the cliff of insolvency…”
Of course, Ticker is right. The Fed is an agency full of crooks, liars and frauds who have helped the Rothschild Cabal banks screw, cheat and defraud the American people; not only for the last 30 years, but for the last 96 years.
More on my Take
Manifestly, the Fed has been increasing money overall; but in the vein of M3 it has not reached the public. It has been going to the big banks where they deposit funds with the Fed and buy US debt (thus, they are not loaning money/credit out to the public to bring on inflation). This system will continue for the immediate future unless and until something happens to upset the Cabal’s apple cart and control over US money.
I have written numerous Goldsmiths to suggest the possible things which can bring on a loss of Rothschild Cabal control over the US economy and monetary system. Presently, the Cabal is in control. It elected a president who has been trained to speak good words if he can read them from a teleprompter. He is a perfect leader to take orders from the Rothschild Cabal.
In this environment, I realize that the Cabal is pushing hard to deflate things. But in the real world, there is not much deflation outside of real estate, interest rates and some commodities. True the Cabal controlled US government agencies lie to us and tell us there is no inflation. But people above the idiot level know that there is some overall inflation—though not as much as was true before 2008. It appears that this present mode will continue for as long as possible. My guess is that the Cabal wants to keep it going until they are ready for WWIII when they can usher in world government.
But contrary to this scenario, I suggest that there are a number of things which can go wrong and kick off the return to aggressive inflation. This will translate to hyperinflation. So, what’s the future? My take is continued and controlled deflation unless and until the Cabal loses control. Will they lose control? I think so; and I am estimating that it will happen this fall and/or by 2010 at the latest. I may wake up one day and find myself wrong; but that was my position last Feb 1, 2009, and it has not changed since then.
I frankly allowed there could be a crop loss this year which could kick off hyperinflation. And I do believe that the food problem is strongly present. But the controlled media and controlled US Dept of Agriculture have successfully lied to and deceived the American people. There is a food problem world-wide and indeed in the US if we were told the truth.
Most readers of this analysis are unaware of how things used to be. In all of my life, until the last few years, the US has had a huge supply of food backed up in grain elevators and storage facilities across the nation. All or almost all of that surplus food is now gone. We are eating only because there is some production annually. If we have a bad crop year, there will be famine in America. And to top it off, we won’t be able to buy food because our leaders have destroyed the value of the dollar. Soon, producers of goods/food world-wide will say no more fiat dollars.
Beyond the food problem, I have also outlined a number of things otherwise which can easily bring on a loss of Rothschild Cabal control. A fall in the public level of confidence in the system, a natural disaster (like a serious US earthquake), internal terrorist(s) attacks, and the pending US attack on Iran are just four more things which can arrive quickly to bring on a loss of Cabal control (as I have covered in the Goldsmiths 94, 99, 100, etc). If and when the Cabal loses control, I think there will be massive federal spending, some part of which will reach the people to bring on hyperinflation (of course, the Cabal will steal and misappropriate most of it; but some of it should reach the public to be spent).
Thus, my position for the present has been a controlled, limited deflation/contraction/depression which will eventually turn into hyperinflation when the Cabal loses control. If we don’t have some major event to bring on the transition, the government will at some point in time start massive spending programs wherein some of the increase in the M3 money supply will reach the people.
We are not there yet since the present big spending programs have only been giving money to the Cabal banks and financial institutions. This money is not reaching the public. If the government ever stops the bail outs of the fat cats and turns the focus to the people, inflation will return in earnest. Left up to the government, it will likely happen next year. But my position has been that it will commence or kick-off this fall because of some event which could bring on a loss of Rothschild Cabal control.
For sure, we will soon know the answer to the above question of whether inflation or deflation.
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-- Posted Monday, 2 November 2009 | Digg This Article
| Source: GoldSeek.com
